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A federal district court has issued a preliminary injunction prohibiting Colorado from enforcing remote-seller reporting requirements on out-of-state sellers not obligated to collect Colorado sales tax. The provisions require said sellers to notify Colorado customers of their obligation to self-report and pay use tax, provide their Colorado customers with an annual report that details the customer’s purchases from the seller in the prior year, and provide the Colorado Department of Revenue with an annual report including the name, address, and total amount of purchases for each of their Colorado customers. The court found that there is a substantial likelihood that the statute violates the federal Commerce Clause by discriminating against and imposing an undue burden on interstate commerce. The reporting requirements burden imposed on out-of-state sellers is not imposed on in-state sellers. It is unlikely that Colorado will be able to demonstrate a lack of nondiscriminatory alternatives to the statute. The statute imposes these requirements on out-of-state sellers whose only contact with Colorado is through mail or common carrier. The ruling in the U.S. Supreme Court case Quill Corp. v. North Dakota likely protects the out-of-state retailers from these burdens on interstate commerce. While the burden of the reporting requirements may be different than the burden of collecting and remitting tax (as addressed in the Quill case), the sole purpose of the burden in this case is the collection of use tax when sales tax can’t be collected. The plaintiff in the court case demonstrated that denying the preliminary injunction would cause irreparable injury in the form of compliance costs that they wouldn’t be able to recover if the statute is later declared unconstitutional. While the injunction might delay Colorado’s collection of some use taxes, it would not prevent the collection of those taxes if the statute is upheld. In addition, the plaintiff argued that the enforcement of a law that is likely unconstitutional does not serve the public interest. The Colorado Department of Revenue has informed taxpayers that they are not required to comply with the remote-seller reporting requirements, pending further action by the court. (Release, Colorado Department of Revenue, January 28, 2011; The Direct Marketing Association v. Huber, U.S. District Court for the District of Colorado, No. 10-cv-01546-REB-CBS, January 26, 2011) For more details on the original bill visit our prior News Item here. NOTE: Colorado has struck down the remote seller reporting requirements in this bill. Click here to see the News Item.


For an update on this news item, see Colorado Use Tax Notice and Reporting Requirements Become Effective July 1, 2017


Governor Bill Ritter signed a bill, effective March 1, 2010, that imposes a sales tax collection responsibility on out-of-state remote retailers that do not collect Colorado sales tax. The nexus presumption bill applies to any retailer that is part of a corporate group that includes another retailer with a physical presence in Colorado. As a result, the out-of-state retailer is presumed to effectively be doing business in Colorado. Out-of-state retailers can challenge the presumption by proving that the Colorado retailer (who is part of the same corporate group) did not solicit on their behalf. Affected retailers must notify Colorado purchasers that sales or use tax is due on their purchases and that a sales or use tax return must be filed. Failure to provide notification could result in a penalty of $5 for each failure. The retailer must also notify Colorado customers by January 31 of the year following purchases that sales or use tax is due. The bill authorizes the Colorado Department of Revenue to require out-of-state retailers to submit annual statements summarizing purchases made by Colorado residents. EMERGENCY REGULATION 39-21-112.3.5 was also promulgated by the Department of Revenue further detailing the requirements and the language required to be included on each invoice. (H.B. 1193, Laws 2010, EMERGENCY REGULATION 39-21-112.3.5 ) 


For an update on this news item, see Colorado Use Tax Notice and Reporting Requirements Become Effective July 1, 2017


In response to Colorado’s recent elimination of the exemption for electronically-delivered software, an emergency regulation has been issued that explains, among other things, the taxation of standardized software that is concurrently available for use in multiple jurisdictions. If the purchaser knows at the time of purchase the software is Multiple Point of Use (MPU) Software, he or she should present the seller with a MPU Exemption Certificate. Upon receiving the MPU Exemption Certificate, the seller is relieved of all obligations to collect, pay, or remit tax, and the burden is on the purchaser to apportion, pay and remit the tax and submit a copy of the certificate to the Colorado DOR.

The purchaser can use any reasonable, consistent, uniform method of apportionment, as long as it is supportable by business records. The apportionment should be based on the total purchase price paid by the purchaser; individual licenses may not be apportioned to specific jurisdictions. The MPU Exemption Certificate is not valid for software that is received at the seller’s business location or software that is loaded onto computer hardware prior to sale. (Emergency Reg. 39-26-102.13, Colorado DOR, effective March 2, 2010)


The Colorado Supreme Court has decided that the Executive Director of the Colorado Department of Revenue had jurisdiction to hear a taxpayer’s appeal of two towns’ denial of use tax refund requests. Although the towns’ municipal codes required that the taxpayer submit to both an informal and a formal hearing, the State’s statutes governing use tax refund appeal processes limited the towns to only be able to conduct informal hearings. Further, the taxpayer’s appeal to the Executive Director was proper because the taxpayer waited the required 90-day statutory waiting period after its requests for issuance of formal decisions by the towns were ignored. (MDC Holdings, Inc. v. Town of Parker, Colorado Supreme Court, No. 08SC972, February 8, 2010)


The Colorado vendor’s service fee, which is a portion of the sales tax collected that is retained by the vendor to cover expenses relating to collecting and remitting the tax, has been suspended from July 1, 2009, through June 30, 2011. If the September 2010 Legislative Council Staff’s forecast indicates sufficient revenue to fund a 6% increase in General Fund spending for fiscal year 2010-2011, the vendor’s service fee will return to 3.33% on January 1, 2011. Interest and penalties will be waived until August 1, 2009 for remittance errors made due to this change in the vendor’s fee.

Previously, the fee was reduced from 3.33% to 1.35% until January 1, 2012. Due to this new fee elimination, the 1.35% rate is only effective from March 1, 2009, through June 30, 2009. (S.B. 275, Laws 2009, effective May 18, 2009, and applicable as noted above)



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